US, Europe, Asia stocks rise(update2)

NEW YORK: The Dow Jones industrial average notched a three-day win streak Monday for the first time in six weeks. A US$19 billion corporate buying spree and encouraging economic news from Japan sent the Dow up 213 points and erased its losses from last week.

The return of what's called "Merger Monday" on Wall Street made investors more optimistic about the future. So did a report that Japan's economy shrank less than feared after the earthquake and tsunami there on March 11. That helped ease worries that the U.S. economy may slide into another recession.

The Dow rose 213.88 points, or 1.9 percent to 11,482.90. It has gained 763 points since Thursday. That's the best three-day point gain since it rose 927 in November 2008, during the depths of the financial crisis. The Dow is also up 7.1 percent over the three days, the biggest percentage gain since it rose 9.5 percent the first three days of the bull market in March 2009.

The Standard & Poor's 500 index rose 25.68, or 2.2 percent, to 1,204.49. The Nasdaq composite index rose 47.22, or 1.9 percent, to 2,555.20.

Markets may have stabilized the last three days, but financial analysts warned investors not to assume that stocks have fully settled down after last week's swings. The Dow rose or fell by at least 400 points in four straight days for the first time. The first downgrade of the U.S. credit rating triggered the volatility. It was worsened by concerns that Europe's debt problems are worsening and that the U.S. economy is weakening.

"You might have these moments of quiet, but the debt crisis in Europe did not go away," said John Hailer, chief executive for the U.S. and Asia of Natixis Global Asset Management. "Our issues with the debt, with what our tax policy is going to be going forward, our unemployment did not go away."

"We are probably going to have to look at some very different levels of volatility than what a lot of investors grew up with over the last 25 to 30 years," he said.

A period of relative stability has been common in past volatile markets. In 2008, stocks plunged between mid-September and mid-November. From mid-November until the beginning of January 2009, the Dow was in a lull of sorts. It ratcheted up and down, mostly in the high 8,000 range. But in early January 2009, it began to plunge again and finally hit bottom at 6,547 on March 9.

Despite its three-day gain, the Dow remains down 9.8 percent since its most recent high on July 21 and down 10.4 percent since its 2011 high set on April 29.

More swings could come this week. Leaders of France and Germany meet Tuesday to discuss Europe's debt problems. Spain and other countries have borrowed so much that they may need help to repay their bills. Investors on Tuesday will get an update on how Spain's economy did during the second quarter.

Corporate deals dominated the news, as companies followed a years-long practice of announcing acquisitions on a Monday. The biggest was Google Inc.'s $12.5 billion cash purchase of wireless phone maker Motorola Mobility Holdings Inc. It is also the biggest acquisition in Google's history. No. 2 was its $3.2 billion purchase of DoubleClick in 2008. Motorola Mobility's stock jumped percent 55.8 percent. Google fell 1.2 percent.

Among other deals: Time Warner Cable Inc. said it will pay $3 billion in cash for Insight Communications Co., which has more than 750,000 cable customers in the Midwest. Agribusiness conglomerate Cargill said it will buy animal nutrition company Provimi of the Netherlands for $2.16 billion. And in the energy industry, offshore driller Transocean Ltd. said it will buy Aker Drilling of Norway for $1.43 billion in cash.

Companies across the United States have accumulated a record amount of cash since the recession ended. They have increased their cash reserves every quarter for more than two years. Those in the S&P 500 index had a total of $963.3 billion at the end of March, according to the most recent data from Standard & Poor's.

Investors have been waiting for companies to use some of that cash on acquisitions, dividend increases and stock buybacks. Many market strategists believe that companies are more confident about the future if they're willing to buy other businesses. So a series of acquisition announcements tends to send stocks higher.

The growing cash hoard has been the result of strong profits. Companies have kept costs low by being slow to hire. Revenue, meanwhile, is growing, particularly from overseas customers. For the 460 companies in the S&P 500 that have reported second-quarter results, earnings were up 12 percent from a year ago.

It was the busiest day for acquisitions since July 11, when Express Scripts said it would buy Medco Health Solutions for $29.1 billion in a combination of the country's largest pharmacy benefits managers. The total value of deals targeting U.S. companies has climbed to $771 billion this year, according to Dealogic. That's up 55 percent from $498 billion at the same point last year.

Some companies are looking to pare back. Bank of America Corp. said it will sell its Canadian credit-card business to TD Bank Group. The bank will also get out of the credit card business in Britain and Ireland. The deals follow others that Bank of America made to move out of foreign credit cards, and they should help the company improve its balance sheet

Bank of America rose 7.9 percent, part of a rally for the financial industry. Financial stocks in the S&P 500 rose 3.2 percent as a group.

Energy stocks in the index rose 3.4 percent after crude oil climbed $2.50 per barrel to settle at $87.88.

Asian and European markets rose earlier after Japan said its economy shrank at just a 1.3 percent annual rate from April through June. That was less than half the drop that economists expected following the earthquake, tsunami and nuclear crisis that struck the country in March.

Still, investors have more reason to worry about the weak U.S. economy.

Manufacturers in New York told the Federal Reserve they're increasingly pessimistic about growth. Manufacturing has been one of the strongest parts of the economy since the recession ended in 2009, but growth began to slow in March. Manufacturing nationwide barely grew in July.

Cosmetics company Estee Lauder Cos. fell 6.5 percent after it forecast earnings for the upcoming year that were below Wall Street's expectations. It also said its net income rose 72 percent last quarter on strong sales growth to China, Russia and the Middle East.

Lowe's Cos., the second-largest home improvement retailer, rose 0.9 percent after it said its net income was roughly flat last quarter on a 1 percent rise in revenue.

More than 10 stocks rose for every one that fell on the New York Stock Exchange. Trading volume at 4.5 billion shares was below the 9 billion it reached last Monday and Tuesday. Volume was close to its average over the last year of 4.3 billion shares.

Global stocks continued their rebound Monday on hopes that the recent sharp volatility in the markets has run its course following a run of stronger than anticipated economic data and after Google announced a $12.5 billion deal.

Though concerns remain over the state of the global economy and Europe's debt crisis, many investors think the recent sell-off has been overdone and are snapping up potential bargains.

"Some stability appears to be returning to markets .... but businesses remain wary that the U.S. government isn't doing enough to arrest its massive budget deficit and that European governments aren't doing enough to avert financial contagion from infecting the banking system," said Sal Guatieri, an analyst at BMO Capital Markets.

The calmer mood has been helped by last Friday's better than expected U.S. retail sales figures for July and news earlier that Japan contracted by an annualized rate of 1.3 percent in the second quarter of the year after the impact of a devastating earthquake and tsunami. The consensus in the markets was that Japan's economy would have shrunk by at least double that rate.

In Europe, London's FTSE 100 closed up 0.6 percent at 5,350.58.

Germany's DAX rose 0.4 percent to 6,022.24.

The CAC-40 in France ended 0.8 percent higher at 3,239.06.

Europe's debt crisis will likely return to the forefront of investors' thoughts Tuesday, when French leader Nicolas Sarkozy and German Chancellor Angela Merkel meet, and second-quarter eurozone growth figures are published.

The meeting is a day after the European Central Bank revealed that it spent 22 billion ($32 billion) last week buying government bonds. Analysts think a large chunk of the money splashed out was spent driving down the bond interest yields of Spain and Italy, who had seen their borrowing costs ratchet up sharply in the preceding weeks.

The ECB's purchases were the biggest weekly amount the bank has made under the emergency measure, exceeding the 16.5 billion it laid out when it started buying Greek government debt in May, 2010.

Asian stock markets mostly inched higher Tuesday after a round of corporate deals on Wall Street lifted sentiment following last week's gyrations.

Oil prices hovered near $87 a barrel in Asia amid investor optimism that global economy may not be slowing as much as feared. The dollar was higher against the yen and the euro.

Technology shares got a boost on news that Google is buying wireless phone maker Motorola Mobility for $12.5 billion in cash - the largest deal ever for Google. Japanese memory chip maker Elpida Memory Inc. rose 4.3 percent. Samsung Electronics gained 4 percent and Hynix Semiconductor was up 3.5 percent.

The Google announcement, along with several other acquisitions announced in the U.S. on Monday, helped restore confidence in risky assets because such deals are interpreted as a sign that companies are more confident about the future.

More swings could come this week. Leaders of France and Germany meet Tuesday to discuss Europe's debt problems. Spain and other countries have borrowed so much that they may need help to repay their bills.

In afternoon trade Japan's Nikkei 225 index rose 0.2 percent to 9,101.53.

Hong Kong's Hang Seng gained 0.4 percent to 20,343.39, as a visit by Chinese Vice Premier Li Keqiang raised hopes for an announcement from Beijing that would be favorable to the territory.

South Korea's Kospi jumped 4.5 percent to 1,873.22 following a public holiday, with steelmaker POSCO soaring 7.7 percent.

Benchmarks in Singapore, Indonesia and Malaysia were also higher.

Australia's S&P/ASX 200 slipped 0.7 percent to 4,253.80 as Westpac Banking Corp. tumbled 4.4 percent and dragged down other financials. Australian flagship carrier Qantas Airways rose 1.4 percent after it announced plans to cut up to 1,000 jobs as part of a major shakeup of its international business.

Mainland Chinese shares and Taiwan's TAIEX were also lower.

In Kuala Lumpur 3.00 p.m.(0700GMT) Tuesday share prices on Bursa Malaysia remained in positive territory despite mild profit-taking on consumer and construction sectors, dealers said.

At 3pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) rose by 0.91 point, or 0.06 per cent, to 1,500.65 after opening 4.4 points higher at 1,504.14.

Dealers said the continued buying interest in selected blue-chips, including Petronas Gas, Kuala Lumpur Kepong as well as Malaysia Marine and Heavy Engineering, pushed the index higher.

The overall market breath was positive, with gainers outpacing losers by 406 to 293 while 285 counters were unchanged and 539 not traded.

Turnover stood at 905.23 million shares worth RM1.1 billion.

The Finance Index rose 35.99 points to 14,266.16, Plantation Index gained 66.86 points to 7,374.04 and the Industrial Index added 11.1 points to 2,748.81.

The FBM Emas Index rose 16.39 points to 10,292.18, FBM Mid 70 Index advanced 49.46 points to 11,295.69 and the FBM Ace Index increased 39.51 points to 3,854.35.

Takaso Resources-Ord Rights was among the active stocks. It was down half sen to half sen.

Hap Seng Cons-Warrant added 11 sen to 42 sen and DVM Technology gained one sen to 16 sen.

For heavyweights, Maybank rose six sen to RM8.66, CIMB was flat at RM8.15 and Sime Darby gained one sen to RM8.86, there were 412 gainers, 296 losers and 283 counters traded unchanged on the Bursa Malaysia. - AP/Bernama